How to Spur Hiring?

Dave SchulerNovember 26, 2012

I’ve had a toothache for the last couple of days, am on pain meds (a very great rarity for me), and am a bit out of it. I’ve got a dentist appointment later today and I expect the whole thing to be resolved one way or another in the next day or so.

While that’s the case I want to put a topic on the floor. What policies can be adopted that will spur hiring? My interpretation is that the position of the Obama Administration is to spur hiring by a combination of subsidies to encourage the specific businesses that receive the subsidies to hire and ordinary Keynesian pump-priming via what are broadly referred to as “infrastructure spending”. Whatever your ideological or philosophical position I think you’ve got to acknowledge that what’s been done to date has been inadequate. There are still at least 15 million people who are unemployed and underemployed plus the additional millions who’ve given up looking for jobs and, consequently, no longer are counted in the official reckonings.

If you think that the only problem with those policies is that not enough has been spent, I think there’s another question you’d need to address. Isn’t there some level of government spending that actually results in reduced total economic activity? That has, in fact, been the case in every fully planned economy like Soviet Russia or pre-1979 China. Government spending at one level or another accounts for about 40% of GDP right now. What’s the level of government spending at which it becomes counter-productive. Clearly, something between 0% and 100%. 40%? 60%?

The policies I’ve advocated here have been very much the opposite of what has been adopted by the Obama Administration. I think we need to encourage more business investment, more new business formation, and more hiring by removing the barriers and disincentives to them. Measures that might be adopted that I’ve suggested in the past include abolishing the payroll tax and corporate income taxes (and, presumably, FUTA as well). I’ve also suggested encouraging the states to produce a common set of regulatory requirements, analogous to the UCC, to reduce the overhead that businesses, particularly small businesses, face.

I also think that we need to encourage freer trade in a very hardnosed manner. I’ve suggested reciprocity under the assumption that countries that export to us are more dependent on us than we are on them. I’m not under any illusion that’s the case with all products and services so, clearly, no blanket policy is possible. I’ve also advocated abolishing our agricultural subsidies on economic efficiency grounds. I’ve also advocated immigration reform to emphasize economic efficiency which would really be a drastic change from present policy.

I’d comment, but I’ve been citing uncertainty and the effect of taxation on investment decisions for so long I have a headache………no one is listening. All apologies to the Average Joes on behalf of the elites.

Unfortunately, once an organization reaches a certain size 90% of all employees will be doing the bare minimum to get by (in some instances even less). There’s no theory to support that. It’s an empirical finding. I read the study long, long ago and it made quite an impression on me at the time but I’m too fuzzy right now to dredge it up.

The problem goes beyond regulations and taxes. Sure, go ahead and reform regs, especially for small businesses. Make them more uniform, if you can get it past the states’ rights advocates. Do away with the corporate income tax. All of those things should help some, but we had low unemployment and good “growth” with higher taxes and a stricter regulatory environment. (We used to control prices/production for transportation, energy and even beer.) Our problem is that we have only been able to achieve “growth” with large increases in credit. At this point I really dont know how good we can be anymore at growing without ever increasing levels of private debt.

Regulation is the only area of personal experience I can drawn on which I continue to see future jobs lost. Projects that do not advance because the regulations are either too rigid or too uncertain to justify the investment.

Since Obama was re-elected, we can expect to see the most significant expansion of environmental regulation in at least a generation. If the first term is any indication, more than a few of these will be adjudicated to be unauthorized executive power grabs. But mainly, Obama avoided criticism for policy in this area, by delaying action until after the election and by not mentioning issues like “climate change” until his acceptance speech.

Absent that, we had essentially no growth in the 2000-2007 period. Really, this goes back to the late 70s early 80s. Does anyone in business know how to exist, let alone grow, anymore except with massive debt financing? Besides the investment side, what happens if consumers stop maxing out their credit?

Absent that, we had essentially no growth in the 2000-2007 period. Really, this goes back to the late 70s early 80s.

Pretty much what I’ve been saying for some time although I’d put the time we started down the wrong path a little later—say, the late 80s or early 90s.

Unfortunately, a lot of the policy of the last several years has been concentrated on trying to pump up some of the sectors in which we’re overinvested. Those include the financial sector, housing, and auto manufacturing. Keep in mind that the world auto production capacity is higher by a multiple than the world consumption of autos and China and India, just to name two, are adding to that capacity on practically a daily basis.

And healthcare.

I’m not insane (appearances to the contrary notwithstanding). I recognize that we’ve got to restructure our economy gradually. But allowing relatively non-productive assets to be refactored into more productive areas does not seem to be the objective of policy.

I know. I’m an employer. I work with black people everyday who want to do a little better. The guy who does my yard. The guy who did the roof. The woman who will take care of the birds for a pittance because I treat her like a lady.

I interpret your graph a little differently. The sharp decline begins around the time I said–early 90s. It was rising through the late 1980s. As I see it most of the slow decline from the 1960s through 1980 can be attributed to slowing GDP growth alone.

1. The minimum wage, which discourages hiring and working, just as a minimum sale price would on Amazon or eBay.
2. All payroll taxes, especially those that are a form of insurance, like FICA, unemployment insurance and workers’ compensation insurance. Folks who want them are indolent, pregnant, hypochriandiacs, and females. The single, child-free young male (even sterile female) will work for $$$ instead.
3. Offer of benefits in lieu of wages, for the same reasons: The single, child-free young person wants $$$ instead, having little need for group health insurance, which is exploited overwhelmingly by breeding hyprochrondriac females.
4. Drug-screening policies. Supposedly, 80% of employers require drug-screening, which is a good way to keep libertarians looking elsewhere, or going Galt, and probably kill off employment in Washington and Colorado!

These are all good ideas, but I think they are mainly nibbling at the edges. Maybe if everything was implemented then things would improve over time. Add government reform to the list. The federal government, particularly the DoD, still operates on outdated industrial model. We need a modern equivalent of the 1947 NSA. But that’s a marginal improvement too….

All of those things should help some, but we had low unemployment and good “growth” with higher taxes and a stricter regulatory environment.

Yes, all things being equal…. However, I’ll disagree on the regulatory environment depending on what you mean by “stricter.” Maybe finance and some other areas are less strict, but in most other areas regulations are more complex, expansive and stricter than they used to be. Some examples off the top of my head – environmental regulations, employment, safety, building codes, tax compliance, etc. Add Obamacare’s effect on employer-provided health care benefits and there’s another one.